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Thousands of veterans deal with foreclosure and it's not their fault. The VA might help
askmoney.com
By Chris Arnold, Robert Benincasa

Updated Thursday, November 16, 2023 • 9:53 AM EST

Heard on Morning Edition

Becky Queen keeps in mind opening the letter with the foreclosure notification.

"My heart dropped," she said, "and my hands were shaking."

Queen resides on a small farm in rural Oklahoma with her other half, Ray, and their 2 young kids. Ray is a U.S. Army veteran who was wounded in Iraq. Since the 1940s, the federal government has actually assisted veterans like him buy homes through its VA loan program, run by the Department of Veterans Affairs.

And now the VA has put this family on the edge of losing their house.

"I didn't do anything wrong," states Ray Queen. "The only thing I did was trust a company that I'm expected to rely on with my mortgage."

Like countless other Americans, the Queens took benefit of what's called a COVID mortgage forbearance, which permitted homeowners to skip mortgage payments. It was set up by Congress after the pandemic hit for people who lost income.

But an NPR examination has actually found that thousands of veterans who took a forbearance are now at threat of losing their homes through no fault of their own. And while the VA is dealing with a way to fix the issue, for lots of it could be far too late.

After NPR initially released this story, a group of 4 U.S. Senators sent out a letter to the VA asking it to right away stop foreclosing on the homes of veterans and servicemembers. It's unclear if the VA will do that.

For the Queens, this all started in September of 2021, when Becky's mother died of COVID-19. She had to take a prolonged leave from work and lost her task.

So last year, with their cost savings diminishing, the couple says they called the company that handles their mortgage, Mr. Cooper, and were informed they could avoid six months of payments. And when they got back on their feet and might begin paying again, the couple states they were told, they wouldn't owe the missed payments in a huge lump amount.

"I really specifically asked 'how does this work?'" states Becky Queen. "They said we're taking all of your payments, we're bundling them, and we're putting them at the end."

That is, the missed payments would be relocated to the back end of their loan term so they could just begin making their typical mortgage payment again.

But that's not how it worked out.

In October 2022, the Department of Veterans Affairs ended the so-called Partial Claim Payment program, or PCP, that enabled property owners to do that. This happened although the mortgage market, housing advocates and veterans groups all warned the VA not to end the program, stating thousands of property owners needed to capture up on missed out on payments. Interest rates had actually risen so much that many could not manage to re-finance or get back on track any other way.

Ray Queen states nobody informed him about any of this.

"How does that occur?" Queen asked. "This is supposed to be a program that you all have to assist people in times of crisis, so you don't take their house from them."

The Queens say they attempted to come off their forbearance in February of this year and resume paying their mortgage. They were both working again. But they ran into hold-ups with the mortgage company.

Then, in September, the couple states they were informed they required to come up with more than $22,000, which they do not have, or either sell their house or get foreclosed on.

Their mortgage servicing business, Mr. Cooper, said in a declaration it "checked out every possible opportunity to overcome an option for this customer." But it stated the VA requires better loss-mitigation alternatives and referred NPR to a letter from advocates, market and veteran groups prompting the VA to restart the PCP program.

The VA "has truly let individuals down"

"The Department of Veterans Affairs has truly let individuals down," states Kristi Kelly, a consumer lawyer in Virginia who states she is hearing from a lot of other veterans in the same circumstance as Ray and Becky Queen.

"The homeowners entered into COVID forbearances, they were made specific guarantees, and there were certain representations that were made," says Kelly. "And the VA essentially pulled the rug out from under everyone."

For some homeowners, ending the program might not indicate foreclosure, however it still implies a financial difficulty.

"Much of these people have 2 or 3% rate of interest loans," Kelly says. With the they could keep that rate of interest. And now, she states, the only method they'll be able to conserve their home is to get in into a loan modification where the rate of interest will be around today's market rate of 7.5%.

"For many individuals, their payments will increase by $600 or $700 a month, due to the fact that the VA has actually decided to end the partial claim program."

Many property owners can't afford such a substantial boost in their regular monthly payment.

According to the data company ICE Mortgage Technology, 6,000 property owners with VA loans who had actually COVID forbearances are presently in the foreclosure procedure. And 34,000 more are overdue.

Kelly says most other property owners in America - individuals with FHA loans, for example, or loans backed by Fannie Mae and Freddie Mac - still have ways to prevent foreclosure by moving missed payments to the back of the loan term.

But homeowners with VA loans don't, because the VA ended that program. So veterans are being treated worse than most other house owners, Kelly said.

"Service members remain in a position where they're going to lose their home," she states. "And for the majority of people, that's everything they work for - and all their wealth is in their homes."

VA has a plan to help, but it could be far too late

The Department of Veterans Affairs says it had no option however to end the program.

"We had a short-term authority for that specific program during COVID," says John Bell, executive director of the Veterans Benefits Administration's Loan Guaranty Service. "It wasn't part of our typical authority."

Some in the industry think the VA did, in fact, have the authority to extend the program. But in either case, it ended it.

Now, however, the VA is taking the situation seriously.

NPR has learned that the VA is dealing with a brand-new program to change the old one. It will operate in a various method however to similar effect, to save people from foreclosure. Bell says it's going to take four to five months to get it up and running.

That's too wish for much of those 6,000 VA homeowners currently in the foreclosure procedure. Not to discuss the lots of more who are delinquent.

Already, information reveals that more VA property owners have been heading into foreclosure given that the VA ended its PCP program. The exact same is not true for FHA loans or loans backed by Fannie Mae or Freddie Mac.

Will the firetruck show up too late?

With many house owners at threat, there's growing pressure on the VA to stop foreclosing on veterans up until it gets its fix up and running.

"There need to be a pause on foreclosures," states Steve Sharpe, a senior attorney at the National Consumer Law Center. "Veterans ought to actually have the ability to have a capability to access this program when it comes online since it's been so long given that they've had something that will truly work.

Sharpe says the VA might also restart the PCP program that it closed down. "They have the authority to do both," he says.

Pausing foreclosures sounds like a great concept to veteran Ray Queen in Oklahoma.

"Let us keep paying towards our regular mortgage between from time to time," he says. "Then when the VA has actually that fixed we can return and deal with the situation. That looks like the adult, mature thing to do, not put a family through hell."

NPR duplicated Ray Queen's plea to John Bell at the VA straight. Bell said the VA is "checking out all alternatives at this point in time."

"We owe it to our veterans to make certain that we're offering them every chance to be able to remain in the home," Bell stated.

Wednesday, a group of U.S. Senators sent out a letter to the VA prompting them to put a hold on any more foreclosures.

"Without this time out, countless veterans and servicemembers might needlessly lose their homes," Sens. Sherrod Brown, Jon Tester, Jack Reed, and Tim Kaine, all Democrats, wrote in a letter to VA Secretary Denis McDonough. "This was never the intent of Congress."

Tester, of Montana, chairs the Veterans' Affairs Committee, and Brown, of Ohio, chairs the Banking Committee. They asked the VA "to carry out an instant pause on all VA loan foreclosures where customers are most likely to be qualified for VA's new ... program till it is available and borrowers can be assessed to see if they certify."

Ray and Becky Queen are hoping the VA does let people keep their homes until the brand-new program can use them a method to get present on their mortgages. Because if the firetruck shows up after your home has actually burned down, it's not going to do much good for the thousands of veterans and service members who require help now.

Transcript

LEILA FADEL, HOST: An NPR investigation has found that countless U.S. military service members and veterans could lose their homes through no fault of their own. As NPR's Chris Arnold reports, the Department of Veterans Affairs is working on a fix. But it could be too late.CHRIS ARNOLD, BYLINE: Ray and Becky Queen are revealing us around their farm in Bartlesville, Okla.BECKY QUEEN: This is Cagney and Lacey, our ducks.ARNOLD: The couple lives here with their 2 young kids. Ray served in Iraq in the Army. Inside their home, he says that he was wounded by an improvised explosive gadget, or IED.RAY QUEEN: And just so you're conscious, I have mental retardation from my time in Iraq. So there's a lot of various things that don't work the way they're supposed to anymore. And my memory is not great.ARNOLD: For decades, the federal government's helped veterans like Queen to purchase homes through its VA loan program. Today the VA has actually put this household on the edge of losing their house.B QUEEN: This is the letter that my husband and I received the other day stating that they're starting foreclosure proceedings.ARNOLD: What's occurring is that like millions of other Americans, the Queens benefited from what's called a COVID mortgage forbearance. It was set up by Congress after the pandemic hit for people who lost earnings. When Becky's mother died of COVID, she needed to take a prolonged leave from work and lost her task. Last year, the couple says their mortgage business informed them that they could skip 6 months of payments while they returned on their feet and then simply start paying their mortgage again.B QUEEN: I extremely particularly asked, how does this work? And they stated, we're taking all of your payments. We're bundling them, and we're putting them at the end.ARNOLD: That is, the missed out on payments would relocate to the back end of their loan term so they might resume their normal mortgage payment. But that is not how it exercised, due to the fact that a year ago in October, the Department of Veterans Affairs ended the program that enabled house owners to do that, even though housing advocates and the mortgage industry and veterans groups all alerted them not to end the program since countless property owners needed to capture up on missed out on payments. Rates of interest, too, had increased so much that many couldn't manage to re-finance or return on track any other way. Ray Queen states nobody informed him about any of this.R QUEEN: How does that take place? This is expected to be a program that y' all need to assist individuals in times of crisis so you do not take their home from them.ARNOLD: The couple states in September, they were informed that they required to come up with a huge payment - upwards of $22,000, which they do not have - or offer their house or get foreclosed on.B QUEEN: My heart dropped, and, like, my hands were shaking.KRISTI KELLY: The Department of Veterans Affairs has really let people down.ARNOLD: Kristi Kelly is a consumer attorney in Virginia who's hearing from a lot of veterans who remain in the very same boat.KELLY: The house owners entered into COVID forbearances. They were ensured pledges, and the VA essentially pulled the carpet out from under everybody.ARNOLD: Kelly states for most other homeowners in America, there are still methods to move your missed payments to the back of the loan term so you can prevent getting foreclosed on, however not if you have a VA loan. So she states veterans are being treated worse than the majority of other homeowners.KELLY: Service members are going to lose their home, and for a lot of individuals, that's whatever they work for and all their wealth, are in their homes.ARNOLD: For its part, the Department of Veterans Affairs states it had no option however to end the program. John Bell heads up the VA's home lending division.JOHN BELL: We had a short-term authority for that particular program throughout COVID.ARNOLD: Some in the industry think the VA did really have the authority to extend the program. Now, though, NPR has actually found out that the VA is dealing with a new program to replace the old one, however that's still 4 or five months away - too wish for much of the 6,000 property owners with VA loans who are in the foreclosure procedure. Not to mention there's 34,000 more who were delinquent. Right now there's pressure on the VA to put a pause on foreclosures while it gets that program running. John Bell states the VA is, quote, "thinking about all choices."BELL: We owe it to our veterans to ensure that we're offering them every chance to be able to remain in the home.ARNOLD: Ray and Becky Queen are hoping that the VA does put a time out on foreclosures, since if the fire engine appears after the home burns down, it's not going to do much great for the thousands of veterans who require assistance now.Chris Arnold, NPR News.